Start Here!

Welcome to Pushed to Shove. If this is your first time here, it may be difficult to understand what the blog is all about. No worries.

This “Start Here” page was created to give you an overview of what I’m up against and get you up to speed quickly.

In the beginning

“Mr. Kaiser,” he said, “you’ve been served.”

Oh joy.

In the Spring of 2006, the Attorney General of the State of Washington subpoened me to come to the Tacoma office, bring every scrap of record I’d created over the last few years, and take part in an “investigative deposition.”

I can think of better ways to spend an afternoon.

I’d learned of their investigation a couple years earlier (at least it seemed like a couple years), and wondered what would become of it. I even considered contacting them directly to see what was up and to offer to answer any questions they had.

My attorney decided that wasn’t such a hot idea and advised I take a “wait and see” approach, and so I did.

The deposition was more of a bother than a worry, and I sat through three plus hours of questions that clearly showed where they were headed . . . and it wasn’t good.

My former company, Fiscal Dynamics, Inc., and my ex-partner, Walt, were in the foreclosure real estate business, and although we did screw up every now and then, our business was 100% legitimate in every way.

Only the AG’s office, it was clear, didn’t see it that way.

So today, with a Foreclosure Rescue Scam consumer protection lawsuit in full swing, I’m battling the AG for my very existence, not to mention my good name.

For what it’s worth . . . I have no intention of losing.

Joe Kaiser
Summer, 2007

The Short Story

I’m embroiled in a bogus Consumer Protection Act case with the Washington State Attorney, Rob McKenna. His office claims I am a “fraudster,” involved in “foreclosure rescue scams.”

That’s ridiculous.

As you’ll learn, this case is fueled by disgruntled county prosecutors who, because of their own self-interests, have conned the Office of the Attorney General into thinking I’m cheating citizens of the State of Washington out of their profits.

In reality, it’s an out-and-out turf war and county prosecutors view me as a competitor in the chase for “overage funds.” These are the excess funds that are sometimes created at tax foreclosure sales and every now and then, end up as “free” money for the counties.

Putting me out of business so I’m no longer a threat is what got this whole thing started, but not everyone had figured that out.

The Office of the Attorney General and staff of Assistant Attorneys General (AAG), being unsophisticated in the tax sale arena, over-zealous as consumer protection advocates, ignorant about real estate investing, and looking to make a name for themselves, had no clue what this case was all about.

They actually thought it had something to do with protecting the Tom and Suzie’s of this state from rouge foreclosure investors like me.

It didn’t.

Here’s reality, and it’s very simple . . .

This lawsuit came about because county prosecutors wanted to make it difficult for me to work MY tax sale overage plays so they could continue to work THEIR tax sale overage plays.

And the AG’s office, fooled into thinking it had something to do with Consumer Protection, was more than happy to jump right in and sue me.

Good luck with that, Rob, because you’re going to need it.

The Long Story

My partner and I have (or had, he bought me out in April, 2006) an investment firm, Fiscal Dynamics, Inc., and have operated since 1999.

In that time we’ve purchased some 300 properties in Washington, mainly from owners in property tax foreclosure, which is our arena.

And in all those transactions, over all those years, we were never once sued by a disgruntled seller (or anyone else), nor did anyone file a complaint with the Office of the Attorney General about the way we did business (or anything else), nor did anyone so much as complain to the Better Business Bureau (or anyone else).

Certainly, we had issues on occasion and made mistakes along the way, but they were honest mistakes we took responsibility for and corrected. Frankly, I can’t even think of one such incident off the top of my head, but that’s just how we operated on a day-to-day basis.

UPDATE – there was one lawsuit, filed my last day with the company, March 31, 2006, that was subsequently settled (my partner just walked away, having no inclination to enter that battle, what with the AG’s case against us raging. That’s too bad; he would have won).

Your escheating heart

Property tax foreclosure in the State of Washington has one simple, overriding (though unspoken) agenda – escheatment of funds to the county. If you actually review the statutes in terms of how property tax foreclosures are to be implemented and prosecuted, it becomes obvious that escheatment of funds is what the framers are most concerned about, and rightly so. Funds escheating to counties through the tax sale process is no small matter.

Properties that go to tax sale and have bidding activity create “overages,” that is, funds over and above the amount of taxes and foreclosure expenses owed. While the record title-holder can apply for those funds, properties where the owner has moved on (or passed on, or any number of other reasons is not around) will not apply and those funds will escheat to the county after 3 years (RCW 84.64.080).

Today, county prosecutors are incensed that we target the very properties where those funds traditionally found their way to the counties via escheatment.

We not only end up owning these properties, paying the taxes (although they make it incredibly difficult for us to do so), and eliminating all possibility of overage being created, much less escheating, we also often allow these properties to go through the tax sale process and claim the overage funds ourselves (our right to claim those funds is the central issue and the driving force of this investigation).

We use the tax sale as an “exit strategy,” and drive properties to the sale whenever possible. Since the county was kind enough to assemble 300 investors in a room (with cashiers checks in their pockets), we see the sale as an opportunity to get paid. Of the 300 people attending the sale, 298 are there to buy, and two, my partner and I, are there to sell.

The AAG’s involved are not sophisticated enough to even begin to understand this on any level.

Fast Forward to Today

The Office of the Attorney General of the State of Washington has filed a complaint against Fiscal Dynamics, my partner Walter D. Scamehorn, a couple associates, and me (I am the only one, who hasn’t settled), claiming a violation of the Consumer Protection Act, and more specifically, “unfair and deceptive business practices.”

It is 100% bogus.

The AG refuses to admit that county prosecutors have put them up to this. They instead choose to pretend that consumers are the driving force, but that is nonsense. This has nothing whatsoever to do with consumers.

Example #1

A recent conversation in a settlement hearing typifies the entire problem. An AAG mentioned she was particularly troubled about one transaction, and described it as “emblematic” of the sort of transactions we do.

The property was valued at $200k, and she could not believe that anyone would willingly sell half their home for $10,000, and that doing so had to be the result of a scam (we often “partner up” with homeowners, paying the back taxes, stopping foreclosure and in exchange, given a fractional interest in the property, typically 25 – 50%).

When it was later brought to her attention that there was some $150k owed against the property, she stated she hadn’t considered the outstanding mortgages on this or any other transaction she’d reviewed because the mere fact that anyone could buy half a $200k house for $10,000 was in and of itself more than enough proof that our operation was a scam.

The concept of “equity,” in terms of real estate, is apparently unknown to them. Incredible.

Example #2

We send out letters and postcards to people in tax foreclosure, and to people with interests in those properties (lienholders). In the tax sale process, lienholders are completely wiped out and have no ability to redeem or claim overage funds.

There actually was one “complaint” filed against us, if that’s what you want to call it. In 2003 some fellow sent a copy of my letter to the AG’s office and said, “this sounds like a scam . . . you should check into it.”

The letter includes language that states something like, “if you don’t take care of this immediately, you’ll receive nothing from the sale.”

The AG, knowing that owners in tax foreclosure may in fact receive overage if their property’s sale results in bidding activity, has jumped on this letter with glee, deciding it’s proof of our deception, and they’ve focused on the word, “nothing.” What they don’t understand is that this is clearly our “lienholder letter” and lienholders, in fact, receive nothing.

And since they refuse to ask for an explanation for anything (an explanation ruins an otherwise good CPA violations claim), they run around making all kinds of wild claims about things of which they not only don’t understand, they don’t even realize they don’t understand.

So now they can claim we con people by telling them they’ll get nothing when we know their sale might result in overage, and in their minds, that proves we’re scam artists.

Example #3

We “partner up” with homeowners in foreclosure. We pay to stop the foreclosure, put the properties in land trusts, and become 50/50 beneficiaries in the trust. We’ve done some two-dozen or more of those deals.

The AG thinks this is a blatant scam, and that these sellers are somehow duped. They are not. They’ve simply decided that half is better than nothing, and that’s good enough, and they agree to pay us a deeply reduced amount in rent for continuing to live in the homes.

The AG thinks we’re waiting for these people to miss one rent payment so we can evict them and take those homes. That’s the common ploy with true scam foreclosure investors. But what the AG refuses to acknowledge about our transactions is . . .

1. If the seller defaults, he doesn’t lose his interest unless we declare him in breach of contract and he refuses to correct that breach. We (as trustees) can evict him, but he still owns a half interest in the trust (we’d simply sell and give him his share of the money).

2. But point 1, frankly, is meaningless, since in the two dozen deals we’ve done, we’ve never declared anyone in breach nor have we evicted anyone for simply not paying rent, even though these people are almost all in default, some by years (we did evict one fellow when he became abusive and impossible to reason with, selling the property and by mutual agreement with attorneys involved every step of the way, split the profits 50/50).

The AG says these people have lost control of their homes. Well, yeah, that’s the requirement for us getting involved, writing big checks, and saving the day. Better to lose control than to lose the home itself (and frankly, they didn’t do such a good job of things when they were in control).

The AG now wants us to appoint a receiver to protect these folks, as if we haven’t done a good enough job ourselves. Remarkable. My question to them is . . . what would the receiver do that we’re not doing?

I suppose if the receiver was compelled to do what was agreed to in the trust agreement, his first day on the job would include filing to evict 90% of the people involved (this is a troubling pattern, the AAG’s, not understanding what is happening, come to mistaken conclusions that result in silly claims and even sillier demands. I’ve asked that someone with a real estate background take over the investigation, but that suggestion was rejected).

We recognize that people in these situations won’t be able to make it on their own, and that we’ll have to carry them for months or years, fixing the properties and paying the taxes and cleaning up their messes. It’s a huge responsibility, and one we could only take on with the margins we’ve built in.

The AAG’s, having never invested their own money, having never partnered with someone with a history of foreclosure, having never been responsible for the day-to-day ownership of a partial interest in an often difficult property, simply have no clue about basic investment concepts like risk/reward or value for value.

Doing partial interest deals that allow sellers in foreclosure to stay in the property and keep an ownership interest is an exceptional service few could pull off. We pull it off routinely and expect to be paid accordingly.

Since they have no appreciation for what it takes to write a big check, with a difficult new partner, on a problem property literally hours before foreclosure is to take place, on a shakey promise to pay and with no time to get title squared away . . . to them it looks like a slam dunk.

It ain’t.

Foreclosure Rescue Scam?

One AAG told me, “Mr. Kaiser, that’s quite a return,” (investing $12k to lock in $40k in one instance). Not only has that guy never paid, he’s now $7k behind in rent (16 months), and getting paid anything won’t be easy.

The AAG’s seem to think we can just go tap these people on the shoulder and they’ll write us $40k checks. They don’t understand that being owed the money isn’t the same as actually collecting the money.

And, no one seems to mention that virtually all these properties have now at least doubled in value and that these partial interest partners, today, have more equity in their properties than they did when we got involved to save them.

The AG calls this is “foreclosure rescue scam.”

I pointed out that it could only be a scam if we didn’t, in fact, rescue people. And in every case where we’ve agreed to, we have. And in every case, those people are in their homes today. The fact that we require compensation for providing this extraordinary service doesn’t make it a scam. It would only be a scam if they weren’t still in their homes!

The AAG’s are incapable of appreciating the difference since they see any profit as proof of a scam.

Fair Deal

It’s really simple . . .

People in foreclosure do business with us because we’ve put in front of them what they consider to be the very best offer they are likely to receive, and it is. They don’t sign because it’s the worst offer.

They are capable, intelligent adults who’ve decided that out of all the options available to them, our deal makes the most sense, and they’ve chosen to accept it as such.

We don’t trick them or try to pull the wool over their eyes. We simply let them know what we are willing to do and if they decide it works, we do everything we’ve agreed to, no more and no less, exactly as promised.

By definition, that is a fair deal, in spite of what the AG might think.

And if that means we make a profit or that funds earmarked to escheat to the county expense funds find their way into our pockets instead, it only means we’re smart businessmen, not scam artists.

Joe Kaiser
Summer 2007

P.S. Ready to get started? It might make sense to view the archives, beginning with June 1, 2007, the very first post.